Reduction of Demand for Strong Spirits may Evidence Going to the Shadow Market

22 november 2017
| Izvestia

Sales of spirits in Russia continue to decrease. Ms. Elena Razumova, an expert of the Analytical Center told the Izvestiya that strong spirits sales may be decreased due to excise duty hike in 2017, and as a result, higher minimum retail and consumer prices.

Elena RazumovaDepartment for Expert Analytics

According to the expert, in 2016, an average salary allowed buying 98
bottles of vodka of one liter capacity at the minimum retail price. "And by
September 2017, when the excise duty and the minimum retail price increased, it
was possible to by only 92 bottles of vodka of one liter capacity. With that,
the demand for vodka may be shifted to the segment of strong wines, beer and
vermouth," Ms. Razumova said.

As estimated by the experts of the Analytical Center, in 2010, a monthly
salary allowed buying 117.7 bottles of vodka of one liter capacity, in 2012 —
122.2, and in 2013 — 87.6. The same situation is with the segment of wines:
while sales of table wines and champagne were decreased in January-September
2017, sales of winy beverages and cheaper fruit wines were increased by 5 and
50 percent, respectively, the specialist said.

"All that's happening may also have other reasons. For example, the decrease
in the demand for strong spirits may evidence going to the shadow market. And
the alternation of generation: the young generation smokes vaporizers instead
of cigarettes and drinks ciders instead of vodka," Ms. Razumova supposed.

The analyst also noted that a purely technical factor related to the change
of the procedure for alcohol turnover data collection might play its role.
"Before January 1, 2017, the source of the information on the volume of retail
sales was the data generated by the Russian Federal Service for State
Statistics on the basis of retailers' reports on their own forms. Starting from
2017, the data come from the state automated information system, in which not
all the data on sales of alcohol in rural areas in the first half of this year
were reflected," Ms. Razumova summarized.